Playfire Acquired By European Games Retailer Green Man Gaming

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Longtime UK gaming community startup Playfire has been acquired by Green Man Gaming, an independent games retailer in Europe. Terms were undisclosed, however sources tell us that it “was a good deal for shareholders” and provides for more upside in the future, based on performance. A social network designed entirely for console and desktop video gamers, Playfire launched fully in 2008 and had raised $3.1 million from Atomico and angels including Michael Birch and William Reeve. The companies have characterised the acquisition as a ‘merger’ which suggests all parties are now looking to Green Man for a future liquidity event such as a sale or further merger. Certainly UK high street chain Game Group, which has pulled out of administration, might be on the look-out for a new vehicle with this kind of traction.

Founded in 2007, Playfire now has amassed more than one million gamers, which allows members to track their gameplay, see what their friends are playing, and follow new games. When gamers sign up, the service automatically captures real-time data from their gaming accounts across PC, PS3 and Xbox 360 platforms and sends it into the service. In many ways it pre-dated the kinds of activity we see across Twitter and Facebook apps. Playfire says it now has almost 100 million individual pieces of data and insights into the buying and playing habits of core gamers worldwide.

Founder Kieran O’Neill will only be staying on in a consultancy role, but retains a “significant stake” in the company. GMG will be integrating its existing retail customers and Payfire users close together to reach around 1.5 million gamers.

Kieran O’Neill, Founder, Playfire, said: “The deal will give us the chance to expand and improve Playfire, while being able to capitalize on the large community we have built. There are so many things we want to do in 2012 and this deal will allow us to execute faster.”

Paul Sulyok, Managing Director, Green Man Gaming, added: “We’ve grown Green Man Gaming organically since selling our first PC download in 2010, and the merger with Playfire is a sound fit that deepens our relationship with gamers and prepares the business for its next stage of growth. Playfire’s powerful community strengthens our current position in the PC games space, and also offers us an ideal entry point into the console market.”

Green Man Gaming sells pre-owned PC games and in theory can do a lot more marketing of pre-owned games into consoles now via the Playfire community – however, they’ve pledged not to spam the community but instead provide more resources.

The move strengthens Green Man Gaming’s existing PC games retail business which services 155 countries and gives it access to the lucrative console space for the first time.

Playfire was originally founded by O’Neill, Seb Hayes and Ben Phillips.

However, this acquisition is not quite the home-run one might have expected from Playfire. It’s main competitor, Raptr, raised raised $27 million in funding, and is the only other company with a similar product to Playfire. Despite raising ten times more cash, Playfire was bigger than Raptr, according to Compete. Plus, Raptr didn’t have full PS3 tracking. So it’s something of a mystery why Playfire couldn’t raise more cash or go further. Perhaps founders and backers wanted to move on?

As usual, this kind of decision comes down to options on the table.

Could they have considered a further fund-raise? Perhaps, but remember, there are 3 founders which would add up to to a lot of dilution, requiring a much larger exit to make it worthwhile. When a startup needs a larger exit it reduces the potential number of acquirers in the market. And Playfire was not the kind of company that IPOs, so you can imagine them deciding to take another route. However, we don’t know for sure if that’s how it played out.

Certainly O’Neill is known to be one of the UK’s best tech entrepreneurs, so perhaps he and his cohorts have a new plan up their sleeves? Let’s hope so.